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Hotel groups are expected to undergo consolidation in 2015 in an effort to grow their business or risk being taken over themselves, according to hospitality consultancy firm HVS.
With economic prospects encouraging, demand for hotel rooms increasing and many parts of Europe having capacity for further rooms, now is a good time to develop, acquire or invest, explained Russell Kett, chairman of HVS London.
Kett said: “Organic growth is a relatively slow way to expand, so hotel companies will be looking for opportunities to make quantum leaps, typically by buying other hotel companies and driving more value through economies of scale.
“Global hotel companies either have to acquire to maintain their growth strategy, or be prepared to be someone else’s target for acquisition. If you’re not dining, you’re dinner.”
Kett described London as a prime investment location, along with Paris, Rome, Amsterdam, Barcelona, Hamburg and Munich, but warned that Athens, Budapest, Kiev, Vienna and Warsaw were cities that should be avoided for hotel development.
However, a lack of hotels on the market means that hotel transaction volumes are currently well below the levels experienced in 2005-2007.
Kett said: “We are seeing a number of new investors in the sector including insurance companies and hedge funds, which together with sovereign wealth funds, high net worth individuals and private equity firms ensure there is keen interest. Indeed, it is likely that the major hotel transactions this year will be dominated by private equity buyers.
“Lack of availability as well as improved demand and profitability should mean that hotel values continue to rise for the foreseeable future.”
Image courtesy of Visit England/Dian Jarvis
